Contents
- Overview
- The objective of power of compounding
- Example of power of compounding
- Years
- Principal (INR)
- 8% (INR)
- 10% (INR)
- 12% (INR)
- 4 key features that impact your investments
- Start early to make the power of compounding work
- Be regular
- Patience is the name
- Improve your spending habit
- Power of compounding: Calculations
- Rule 72 for the power of compounding
Overview
If an individual wants to generate wealth, he/she should start investing early to benefit from the power of compounding. It is an art that needs to be perfected to generate wealth to reach major financial objectives. Learn what is alternate investment funds in India. You need to be patient and disciplined with this. According to Albert Einstein “Compound interest is the eighth wonder of the world. He, who understands it earns it. He who ignores it pays it.”
Power of compounding simply is that you earn interest on interest. It is advised to start with small initial investments as the main objective is to keep investing in a long duration of time and not the amount invested in it. You can start investing first in the best short term investment plans to invest in 2019. You might be wondering what are the best investment plans to invest in 2019.
The objective of power of compounding
If you need to have a car or start a family in a lovely house, then you might need a lot of money now and it might be impossible to consider the availability of amount within 3-4 years. But in the long run, let’s say 10-15 years, if you start earning now and save till 10 years, maybe it won’t be such a distant dream by using the power of compounding. Read on what are the best investment options in India.
Example of power of compounding
The below table shows the power of investing just Rs. 10,000 for a period of 10 years on different interest rates.
Years | Principal (INR) | 8% (INR) | 10% (INR) | 12% (INR) |
|---|---|---|---|---|
| 1. | Rs. 10,000 | Rs. 10,800 | Rs. 11,000 | Rs. 11,200 |
| 2. | Rs. 10,000 | Rs. 11,660 | Rs. 12,100 | Rs. 12,540 |
| 3. | Rs. 10,000 | Rs. 12,600 | Rs. 13,310 | Rs. 14,050 |
| 4. | Rs. 10,000 | Rs. 13,600 | Rs. 14,640 | Rs. 15,740 |
| 5. | Rs. 10,000 | Rs. 14,690 | Rs. 16,110 | Rs. 17,620 |
| 6. | Rs. 10,000 | Rs. 15,870 | Rs. 17,720 | Rs. 19,740 |
| 7. | Rs. 10,000 | Rs. 17,140 | Rs. 19,490 | Rs. 22,110 |
| 8. | Rs. 10,000 | Rs. 18,510 | Rs. 21,440 | Rs. 24,760 |
| 9. | Rs. 10,000 | Rs. 19,990 | Rs. 23,580 | Rs. 27,730 |
| 10. | Rs. 10,000 | Rs. 21,590 | Rs. 25,940 | Rs. 31,060 |
4 key features that impact your investments
Start early to make the power of compounding work
It’s often visible in the outer world, the one who starts early can reap the benefits of the discipline and labor put into any task. For this to be to true in your case, start investing early. In addition to this, did you know you can save tax while investing? If not, educate yourself on how to choose the best tax saving option. As early as you start earning. Instead of waiting for a particular age for the investments to be made, start it today only. Make a plan to set aside a certain % of your earnings to be put into an investment and then be disciplined enough to meet it. It is highly crucial as it will develop a great mindset to move on in life. Don’t postpone this, as this will make you reach your destination harder.
Be regular
It is very important for everyone to make investments a habit in your life. Make it a priority in your life. Some people have an issue with considering investments as they have very limited earnings. So, why not make it a 90-10 rule? Use up all of your 90% of income and then save the rest. A person earning Rs. 20,000 can save Rs. 2,000 every month for a better future and this will benefit him/her in the long run as well using the power of compounding. You can use the option of SIP investment. Must read on why SIP is considered the best way to invest in the mutual fund.
Patience is the name
Patience is most certainly a virtue in this case. You need not panic or be anxious about this. A small investment of Rs. 2,000 per month might not seem like such a huge amount but when compounded annually for the same you’ll see huge cash amount with you. In other words, stop spending your savings.
Improve your spending habit
With the advent of a consumer-based economy, it is important to understand that you need to be cautious about spending a lot. You need to act smart in the wake of the moment. After saving dedicated, you will see a huge change in your expenditures. You will start spending only on those items which are necessary and very essential. It is very wise to know how to spend money before earning some. Keep on reading on the top 5 mutual funds investments you can make right now.
Power of compounding: Calculations
You can download an offline software to know how much will you be making after a certain period of time. For this, feed in the amount you will be investing each month and then using the current rates earned on savings, with the stipulated time period, you can get to the amount you desired. Also, know about the Best Options of Investing available in India.
You need to select the required rate and the time period, along with the amount invested as all of us have different needs and dreams. You can easily know when your money will be double, triple or quadruple the original value invested using the power of compounding.
Rule 72 for the power of compounding
With the help of the very famous rule 72, you can calculate when will your money grow into a double. For this, divide 72 with the current market interest rate. Let’s say it is 10%, then it will take 7.2 years to double your savings using the power of compounding.
We at WealthBucket would help you save by your extra money into different types of mutual fund schemes. It could be in equity mutual funds, debt mutual funds, short-term mutual funds or in small-cap mutual funds. For more services related to mutual fund investing, you can either call us at +91 9999379929 or mail us at contact@wealthbucket.in
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